Trust and Swindling on the Internet

Bezalel Gavish

Fraud on the Internet is developing into a major issue of concern for
consumers and businesses. Media outlets report that online fraud
represents "an epidemic of huge and rapidly growing proportions”. One
area that is particularly of interest is the area of swindling
activities related to online auctions. Understanding fraud is
especially important because of the "network externality” effect, in
which a large number of satisfied users attracts other users to use
the commercial services offered through the Internet, this effect is
based on the knowledge that satisfied traders induce others to trade
on the Internet increasing the trading system efficiency. Headlines
that present swindling activities on the internet deter users from
using the internet for commercial activities.

We will present and classify methods that swindlers use in order to
defraud users, and suggest procedures to reduce the level of
successful fraudulent activities on the web. We will also report on a
preliminary empirical survey on the magnitude of fraudulent auctions
on a large auction site. The empirical results obtained in this
survey, invalidate claims by online auction site operators that
fraudulent activity is negligible. We will also discuss methods to
reduce fraud and the need for extensive research on Internet fraud.